Protection for base level workers

I have to admit that minimum wage scheme is never the ultimate solution to improve the incomes of the poor, but in the age of capitalism teeming with greed and plundering, it nevertheless offers some protection for base level workers.

Translated by DOMINIC LOHSin Chew Daily

Workers in Malaysia are crying over their meager salaries while employers grumble about the excessive financial burden following the implementation of the minimum wage scheme.

With effect from July 1, the minimum wage for Peninsular Malaysia will be increased to RM1,000 a month from RM900, while that of East Malaysia will be raised from RM800 to RM920.

MTUC has urged the government to raise the minimum wage to RM1,200 but employers say even RM1,000 is a big burden to them. If the measure is eventually put into practice, more layoffs could be anticipated.

While the employers might sound a little exaggerating, to be honest, there is some kind of correlation between unemployment and minimum wage.

The logic couldn’t have been simpler: Under the minimum wage scheme, the cost of doing business will invariably be higher, and the only solution to lighten the employer’s burden is to lay off existing employees and freeze new hirings.

Economists have conducted studies on the influences of minimum wage on the youth labor market, and discovered that when the minimum wage is raised by 10%, employment opportunities for youths will be reduced by 1-3%.

Even top economists are increasingly vocal against minimum wage scheme. In his book Economics in One Lesson, Henry Hazlitt wrote, “The apparently easy method of raising wages by government fiat is the wrong way and the worst way.” He said real wages had to come from production and not government fiat.

Hazlitt might be right in a highly dynamic and liberal market, but in reality the labor market does not always work this way. Many employers have attempted to squeeze the labor value out of their employees, turning it into their personal wealth. Along the process, the interests of low-level workers are often compromised.

The minimum wage scheme provides a protective shield for base level workers, ensuring that their salaries are sufficient to sustain a decent living or even to improve their livelihoods..

Sure enough this is only an expediency plan to tackle the greed of capitalism, but for long term development, Henry Hazlitt might still be right.

Real wages should come from improved productivity, and the wages an employee receives should be tied to his productivity. In other words, businesses should seek to increase their competitiveness by means of business expansion, mechanization and enhancement of their employees’ operational efficiency, and from there increase the employment opportunities and wages.

During the transitional period (the true free market is yet to materialize here as companies are slow in their business expansion and mechanization drive while the wages of entry level workers remain pathetically low), perhaps an appropriate level of minimum wages should serve as a feasible compromise.

Meanwhile, the government must introduce other measures to offset the possible unemployment issue arising from the implementation of minimum wage scheme. When Franklin D. Roosevelt’s administration first proposed the minimum wage bill in 1938, it also introduced a series of measures aimed at increasing job opportunities.

I have to admit that minimum wage scheme is never the ultimate solution to improve the incomes of the poor, but in the age of capitalism teeming with greed and plundering, it nevertheless offers some protection for base level workers.